OREANDA-NEWS. Fitch Ratings affirms its 'AA' rating of the Colorado School Credit Enhancement Program (also known as the school district intercept program, or SDIP). The Rating Outlook is Stable.

Upon request, Fitch will assign the 'AA' rating to eligible Colorado school district debt. The total amount of Colorado enhanced school bonds currently outstanding is approximately \\$7.6 billion.

SECURITY

The state's credit enhancement program for school districts provides that the state will make payments to the bond paying agent for debt service upon notification that the participating district will not be able to provide the funds.

KEY RATING DRIVERS

SOUND PROGRAM MECHANICS: State law establishes clear processes that would allow for timely payment of principal and interest, if a school district is unable to make a scheduled debt service payment on general obligation (GO) bonds and certain electoral authorized lease purchase agreements issued after July 1991.

STATE CREDIT QUALITY AND BROAD SOURCE OF ENHANCEMENT: The program rating reflects the state of Colorado's overall credit quality and the broad source for the enhancement provided. Enhancement in this program comes from the state's general financial resources, and is not limited to state school aid.

STRONG STATE SUPPORT OF EDUCATION: Colorado's support for its schools is strong, evidenced by a state equalization program assuming a minimum funding level per pupil. Further support is shown by the Treasurer's providing interest-free loans to districts for cash flow assistance.

RATING SENSITIVITIES
The rating is sensitive to changes in the statutes or administrative procedures governing the SDIP, as well as changes in the overall credit quality of the state of Colorado, to which this rating is linked.

CREDIT PROFILE

The 'AA' rating on the school district intercept program reflects the state of Colorado's overall credit quality, as well as the breadth and strength of the state's SDIP law and associated security features. The state features a diverse and robust economy, with some concentration in natural resources, an above average socioeconomic profile, and a modest debt position with weak pension funded ratios. Additionally, state financial operations are well maintained, though flexibility is impeded by Taxpayers Bill of Rights (TABOR) requirements and an active voter initiative process.

Section 22-41-110, Colorado Revised Statutes establishes SDIP (the program). Under the statute, debt service on certain school district obligations incurred after July 1, 1991 will, if necessary, be paid by the state to prevent a missed payment. Any payments by the state treasurer will be repaid by withholding a portion of subsequent state aid to the district, and property tax and specific ownership revenues collected by the county treasurer on behalf of the district. The enhancement has never been called on.

Program mechanics provide for timely payment from a broad resource base. Upon notification from a paying agent that an impending debt service payment due the next business day has not been made, the state treasurer must immediately contact the school district. If the payment is not forthcoming from the district, the state treasurer must make the payment from the state's available funds. This legal commitment is broader than that of most states with state credit enhancement laws as the source of enhancement in SDIP comes from the state's general financial resources, not just state school aid. The state has access to sizeable borrowable resources estimated at \\$5.1 billion at June 30, 2015. An additional credit strength is the state's statutory covenant not to impair bondholder protections under the program.

Colorado's support for its schools is strong, evidenced by a state equalization program establishing a minimum funding level per pupil, and Amendment 23 of the constitution enacted in 2000 that provides for the state education fund to supplement general fund support of school funding. In addition, the treasurer provides interest-free loans to districts for cash flow assistance. State oversight of districts includes compliance with certain statewide financial regulations. Also, the state constitution's Taxpayer Bill of Rights requires school districts, as it does all local governments, to maintain 3% emergency reserves.